Prof. Arie Belldegrun resigned a week ago from the board of directors at Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA). Some said that his resignation was motivated by the sharp fall in the company's share price (40% over the past year). Belldegrun, however, insists that he resigned in order to devote his time to Kite Pharma, which he founded, and in which he is the CEO.
Teva lost its Copaxone trial last week in the US. The company sought to prevent its competitors, Mylan N.V. (Nasdaq: MYL; TASE: MYL) and Momenta, from launching a generic version of 40-milligram Copaxone. The Court ruled, however, that the company's patents for the multiple sclerosis drug, which accounts for 30% of Teva's revenue and a third of its profit, are no longer valid, and do not protect the company from such competition.
Belldegrun told "Globes" today, "Every drug company has to change constantly. Teva was very comfortable with Copaxone, but it should have already prepared 8-10 years ago for its subsequent life, and no such proper preparations were made. You can't accuse the company; it grew so fast. Now it is investing in its future development, but a temporary hole has been left, and must be survived. Teva's future will come from Prof. Michael Hayden's department (the innovative department, G.W.). Everyone is sorry that (former generics division head) Siggi (Sigurdur) Olafsson left, but Siggi wasn't working on Teva's future."
Does Teva have what it takes to replace the revenue from Copaxone in its pipeline, or should it make more acquisitions?
Belldegrun: "The existing pipeline provides sufficient infrastructure to make Teva a significant innovative player; it just takes time and money. I recently took part in a scientific meeting between Teva's team and one of the leading universities, and it looked like the scientists admired what Teva was doing. It's a pity that it didn't happen 10 years ago."
Is Erez Vigodman the right CEO for this transition period?
"Erez is a good manager and a good guide. If he gives Michael and the R&D group what they need, there will be results. What's happening to Teva is not unique. Most of the drug companies have lost 30-40% of their value in recent months - even Kite Pharma, which has fulfilled everything it promised and more." Kite Pharma's current market cap is $2.6 billion, 40% below its peak.
Critical year at Kite Pharma
Kite Pharma is developing a drug for treatment of blood cancer using the CAR-T method, regarded as one of the most promising methods in the field. "2017 stands to be the most critical year for Kite Pharma, in which we will stop being a drug development company and become a real pharma company," Belldegrun says.
Kite Pharma's product is based on the production of the patient's immunity system cells. It treats them with genetic engineering technology in order to encourage the immune system cells to recognize and attack the tumor, and to return to the body. "This will be the first time in history that a genetically engineered product is returned to the patient's body," says Belldegrun.
The results of the most recent trial the company needs in order to obtain approval for its product are expected in six weeks. In an analysis of the results after three months, 70% of the patients had some response, and the disease disappeared from 50% of them. The final results will examine the situation after six months. According to Belldegrun, the main results in patients examined in the company's Phase II trial appeared after a few months, and were maintained in the long term.
Belldegrun is optimistic about the results, but there could still be surprises if the US Food and Drug Administration (FDA) suddenly decides to demand additional information that is liable to delay the launch, or if the FDA delays its approval of the product for internal reasons. The FDA must also approve the company's production plant.
Is the freeze on FDA hiring liable to affect you?
"No, because even Trump stipulated special handling for live-saving products. The rate of approvals for new drugs in 2016 was low, and the same is expected for 2017, but it's not because of the FDA; it's because the sources of innovative drugs have dried up."
Using Kite Pharma's product is complicated, because it depends on producing cells from each patient - it is not a shelf product. Belldegrun claims that Kite Pharma is already ready to provide this complicated treatment in the US. Concerning the company's expected revenue in 2018, he says, "Look at what our main competitor, Novartis, said about the size of its potential market - hundreds of millions of dollars. Its market is smaller than ours, and it will reach the market after we do."
I noticed that you didn't mention Juno Therapeutics as an important competitor.
"Juno uses a different process to make its products, and uses different materials. That's why the market didn't penalize us when their product had safety problems, even though we both use the CAR-T method. Juno appeals to the same smaller indication as Novartis, and they are expected to get there later than Novartis. I'm certainly not taking them lightly, and especially not their science, but turning science into a product is an ability that not every company has."
Published by Globes [online], Israel Business News - www.globes-online.com - on February 6, 2017
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